Years of working at your organization have provided your employees – especially managers and executives – valuable insight into the way your business operates. What is to prevent employees from leveraging their knowledge of your proprietary business information in a similar position with a competitor?
If a key employee works with you long enough and closely enough, he or she will inevitably pick up insider knowledge. How, then, can you protect your business? The inevitable disclosure doctrine may be one answer.
What Is the Inevitable Disclosure Doctrine?
The inevitable disclosure doctrine is a legal theory that your former employee will inevitably disclose confidential and proprietary information – information protected by the Texas Uniform Trade Secrets Act – if she or he accepts a position with similar duties and responsibilities with a competitor.
“Even if an employee isn't subject to a non-compete or confidentiality agreement, they could still violate trade secret laws by taking a job that will inevitably require them to use their former employer’s hard-earned trade secrets,” says Managing Shareholder Trey Hendershot. “You can't unlearn a business plan.”
The inevitable disclosure doctrine may help you demonstrate that injunctive relief under the Texas Uniform Trade Secrets Act is necessary to prevent the misappropriation of your trade secrets.
Inevitable Disclosure and the Texas Uniform Trade Secrets Act
In Texas, trade secrets are protected by the Texas Uniform Trade Secrets Act (TUTSA) enacted in 2013. TUTSA gives businesses remedies to stop trade secrets from being misappropriated (injunctive relief) and recover damages. Trade secrets are defined as information that has economic value because it is not generally known and that has been the subject of reasonable efforts to maintain its secrecy.
TUTSA specifically states that actual or “threatened misappropriation may be enjoined” as long as the enjoinment, or injunction, does not prevent a person from “using general knowledge, skill, and experience that person acquired during employment.”
When Does the Inevitable Disclosure Doctrine Apply?
The inevitable disclosure doctrine may apply when:
- The employee in question has knowledge of the former employer’s valuable and protected confidential information;
- The employee defendant’s new employer is a competitor who runs a similar business or the employee has started a competing business; and
- The new and former job roles are so similar that it is unlikely the defendant will be able to do the new job without using confidential information.
The inevitable disclosure theory is most often used to support a temporary injunction – a court order that preserves the status quo until a full trial can be held to argue the merits of the case – and not for awarding damages. Essentially, the theory is most often effective in temporarily preventing irreparable harm from being done by the disclosure of the trade secret.
Texas Courts and the Inevitable Disclosure Doctrine
In a recent court case, Accruent, LLC v. Short, No. 1:17–CV–858–RP (W.D. Tex. Jan. 4, 2018), a court ruled that an employer's trade-secret misappropriation case had grounds to proceed on the basis that a former employee was unlikely to perform at their new job without utilizing trade secrets.
However, in another case, EHO360, LLC v. Opalich, No. 3:21-CV-0724-0B, 2021 WL 3054867, at *5 (N.D. Tex. July 20, 2021), the court rejected the doctrine and ruled that the plaintiff had no evidence that it had lost business or that the defendants were using the confidential information.
As a rule of thumb, employers who wish to leverage the doctrine should have some sort of evidence that an employee will inevitably use trade secrets in a new position. What constitutes such evidence varies on a case-by-case basis. However, courts cannot prevent an employee from seeking employment based simply on the idea the employee may use trade secrets – the case needs to be more concrete than that.
Secondly, the case must not infringe on state laws that govern restraints on the practices of a lawful profession, trade, or business.
Hendershot Cowart P.C.: We Specialize in Trade Secrets Law
Trade secret misappropriation cases can be complex, and technicalities often play a significant role in the outcome of the case. As a result, working with a trade secrets attorney you can trust could mean the difference between a won and lost case based on the Inevitable Disclosure Doctrine.
At Hendershot Cowart, P.C., our attorneys have been helping clients successfully navigate complicated business law and trade secrets cases for decades. To schedule a consultation with our team and learn more about how we can help with your case, contact us online or via phone at (713) 909-7323.